Financial Data and Key Metrics Changes - First quarter revenue was $391 million, down from $425.6 million in the prior year, reflecting an 8% decrease [8][25] - Gross profit was $102.8 million with a margin of 26.3%, a slight increase of 10 basis points year-over-year [9][25] - Operating income was $44.5 million, down 5.4% from the previous year, but operating margin improved by 40 basis points [10][25] - Net income for the quarter was $31.8 million or $2.64 per diluted share, compared to $32.1 million or $2.57 per diluted share in the same period last year [10][25] - Total debt was $216.8 million, with net debt of $16.5 million, a significant improvement of 91.7% year-over-year [15][25] Business Line Data and Key Metrics Changes - The Industrial Equipment division reported record net sales of $227.1 million, representing 12.5% organic growth year-over-year [12][20] - The Vegetation Management division's net sales were $163.9 million, a decline of 26.8% compared to the previous year, but a sequential improvement of 2.6% [11][21] - Operating income for the Industrial Equipment division was $31.2 million, or 13.7% of net sales, reflecting a 20 basis point improvement [12][20] - The Vegetation Management division's operating income was $13.3 million, or 8.1% of net sales, down from $21.7 million in the prior year [21][25] Market Data and Key Metrics Changes - The backlog for the Industrial Equipment division was $513 million, down 8.3% year-over-year but up 6.6% sequentially [20] - Order bookings in the Vegetation Management division improved by nearly 18% year-over-year, marking the fifth consecutive quarter of improvement [22][25] - Agricultural equipment orders in North America were up 26% year-over-year, indicating a recovery in demand [22][25] Company Strategy and Development Direction - The company is focused on driving growth and optimizing operations while pursuing acquisition opportunities of meaningful scale [28][29] - Management emphasized the importance of maintaining a strong balance sheet and low net debt to support future investments [15][28] - The company plans to continue cost reduction initiatives and facility consolidations to enhance operational efficiency [61][63] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's prospects for the remainder of 2025, despite ongoing risks from tariffs and global market uncertainties [27][28] - The governmental and industrial contractor markets are expected to remain strong, with increased spending on maintenance-related activities [38][39] - Management anticipates a gradual recovery in the Vegetation Management division, with expectations for improved sales and margins in the second half of 2025 [41][52] Other Important Information - The company approved a quarterly dividend of $0.30 per share, reflecting its commitment to delivering long-term value to shareholders [15][25] - Interest expense decreased by $2.9 million due to lower debt levels, contributing to improved financial performance [10][25] Q&A Session Summary Question: What are the pain points from tariffs? - Management indicated that about 70% of revenue comes from the U.S., with minimal impact from tariffs on production shifts [31][32] Question: What is the inflationary impact on customer demand? - Management noted that demand may change primarily in non-governmental markets, with governmental spending remaining strong [37][38] Question: What drove the 40 basis point increase in operating margin? - Cost reduction initiatives and facility consolidations were key drivers behind the margin improvement [44][48] Question: What is the outlook for M&A and share buybacks? - M&A remains the first priority, with several opportunities being pursued, while share buybacks are considered if M&A does not materialize [50][51] Question: What is the outlook for vegetation revenues? - Management is optimistic about a gradual recovery in vegetation revenues, supported by improving order bookings and dealer restocking [52][56]

FOR THE TRANSITION PERIOD FROM ____ TO ____ Commission file number 0-21220 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ALAMO GROUP INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of Delaware 74-1621248 i ...

For: Alamo Group Inc. Contact: Edward Rizzuti EVP Corporate Development & Investor Relations 830-372-9600 First quarter 2025 net sales of $391.0 million declined 8.1% compared to $425.6 million in the first quarter of 2024. Gross profit of $102.8 million or 26.3% of net sales declined by $8.8 million as a result of lower net sales, however, gross margin improved by nearly 10 basis points, compared to the same period of the prior year. The Vegetation Management Division began to recover as first quarter 2025 ...

Core Insights - Alamo Group Inc. reported a net sales decline of 8.1% in Q1 2025, totaling $391.0 million compared to $425.6 million in Q1 2024, while gross profit decreased by $8.8 million but gross margin improved slightly [3][4][9] - The company experienced a strong performance in its Industrial Equipment Division, with sales up 12.5% year-over-year, while the Vegetation Management Division saw a significant decline of 26.8% [8][11] - The backlog at the end of Q1 2025 increased to $702.7 million, indicating a healthy demand outlook, with the Industrial Equipment Division backlog rising to $513.2 million [4][11] Financial Performance - Consolidated net income for Q1 2025 was $31.8 million, or $2.64 per diluted share, slightly down from $32.1 million, or $2.67 per diluted share in Q1 2024 [4][9] - Operating cash flow was reported at $14.2 million, with cash and cash equivalents reaching $200.3 million at the end of the quarter [5] - The company’s total debt was reduced to $216.8 million, with total debt net of cash improving significantly by $183.2 million or 91.7% compared to Q1 2024 [9][31] Division Performance - The Industrial Equipment Division achieved an operating margin of 13.7%, reflecting a sequential improvement of 130 basis points, while the Vegetation Management Division's operating margin was 8.1%, showing a recovery with a sequential improvement of 410 basis points [3][10] - Orders in the Industrial Equipment Division were up nearly 59% compared to Q4 2024, indicating robust demand, while the Vegetation Management Division saw a 18% increase in orders compared to Q1 2024 [11][12] - The backlog for the Vegetation Management Division was $189.5 million, down 30.3% year-over-year but increased for the third consecutive quarter [12][34] Outlook - The company anticipates continued strong demand in the Industrial Equipment Division and a return to modest growth in the Vegetation Management Division, driven by cost reduction actions implemented in 2024 [6][13] - The outlook for the next several quarters remains cautiously optimistic, with expectations for improved profitability and a stable market environment [13][14]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $385.3 million, reflecting a 7.7% decline compared to the same period last year [13] - Gross profit for the quarter was $91.8 million with a margin of 23.8%, a decline of 230 basis points year-over-year [13] - Net income for the fourth quarter was $28.1 million or $2.33 per diluted share, compared to $31.5 million or $2.63 per diluted share in the same period last year [15] - Full year net sales were $1.6 billion, a 3.6% decrease compared to 2023 [19] - Operating income for the year was $164.8 million or 10.1% of net sales, representing a decrease of $33.2 million year-over-year [20] Business Line Data and Key Metrics Changes - The vegetation management division reported net sales of $159.8 million, a 25.5% reduction compared to the fourth quarter of 2023 [16] - Operating income for the vegetation management division was $6.5 million, representing 4% of net sales [17] - The industrial equipment division net sales were $225.5 million, representing 11% growth compared to the fourth quarter of 2023 [18] - Operating income for the industrial equipment division was $28 million or 12.4% of net sales, a slight improvement compared to the same period last year [18] Market Data and Key Metrics Changes - Governmental and industrial contractor customers continued to invest in fleet modernization, with fourth quarter sales of $226 million up 11% [32] - The vegetation management division faced headwinds due to elevated interest rates and excess channel inventory, leading to a 25% decline in fourth quarter sales [36] - Order bookings in the vegetation management division improved sequentially during 2024, indicating potential recovery [38] Company Strategy and Development Direction - The company executed cost reduction initiatives aimed at improving efficiencies in the vegetation management division, including plant consolidations and workforce reductions [22] - The company is optimistic about meaningful acquisitions in 2025, with an active acquisition target pipeline [51] - The company aims to achieve annualized savings of $25 million to $30 million from cost reduction initiatives [23] Management's Comments on Operating Environment and Future Outlook - Management noted that the industrial equipment division is expected to continue producing strong results and mid-single-digit organic sales growth [49] - The vegetation management division is anticipated to show modest but steady recovery in order flow and operating margin [49] - Management expressed confidence in navigating inflation and tariff impacts, particularly with a strong North American presence [46][48] Other Important Information - The company reduced its total debt to $220.5 million, with net debt of $23.2 million, an improvement of $160.2 million or 87.3% compared to the end of 2023 [28] - The board approved a quarterly dividend of $0.30 per share, representing a 15% increase versus 2024 [30] Q&A Session Summary Question: Will we start seeing benefits from the plant consolidation in the second quarter? - Management confirmed that significant mix changes are not expected within the industrial equipment division and that January has started positively [55][56] Question: What will the company do with its free cash flow? - Management indicated that the primary purpose of accumulated cash is for M&A opportunities, with potential share buybacks if no suitable targets are found [61] Question: Can you discuss the order activity on the industrial side? - Management noted that the back truck market held steady, while street sweepers and snow removal saw slight declines due to seasonal factors [92][95] Question: What are the expected savings from the cost reduction initiatives? - Management confirmed that the $25 million to $30 million in savings is primarily from the vegetation management division, with expectations for improved decrementals in 2025 [104][105] Question: What are the long-term margin expectations for the industrial segment? - Management expressed confidence that a 15% operating margin in the industrial segment is achievable by the end of 2025 [110]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $385.3 million, reflecting a 7.7% decline compared to the same period last year [13] - Gross profit for the quarter was $91.8 million with a margin of 23.8%, a decline of 230 basis points year-over-year [13] - Operating income in the fourth quarter was $34.4 million with an operating margin of 8.9%, a decline of 180 basis points compared to the same period in 2023 [14] - Net income for the fourth quarter was $28.1 million or $2.33 per diluted share, down from $31.5 million or $2.63 per diluted share in the same period last year [15] - Full year net sales were $1.6 billion, reflecting a 3.6% decrease compared to 2023 [19] - Net income for the year was $115.9 million compared to $136.2 million in 2023 [21] Business Line Data and Key Metrics Changes - The vegetation management division reported net sales of $159.8 million, a 25.5% reduction compared to the fourth quarter of 2023 [16] - Operating income for the vegetation management division was $6.5 million, representing 4% of net sales [17] - The industrial equipment division net sales were $225.5 million, representing 11% growth compared to the fourth quarter of 2023 [18] - Operating income for the industrial equipment division was $28 million or 12.4% of net sales, a slight improvement compared to the same period last year [18] Market Data and Key Metrics Changes - Governmental and industrial contractor customers continued to invest in fleet modernization, with fourth quarter sales of $226 million up 11% [32] - The vegetation management division faced headwinds due to elevated interest rates and excess channel inventory, leading to a 25% decline in fourth quarter sales [35] - Order bookings in the vegetation management division improved sequentially, indicating a potential recovery [38] Company Strategy and Development Direction - The company executed cost reduction initiatives aimed at improving efficiencies in the vegetation management division, including plant consolidations and workforce reductions [22] - The company is focused on driving growth and optimization of operations while maintaining a strong balance sheet for potential acquisitions in 2025 [51] - The company expects to achieve annualized savings of $25 million to $30 million from cost reduction initiatives [23] Management Comments on Operating Environment and Future Outlook - Management noted that the industrial equipment division is expected to continue producing strong results with mid-single-digit organic sales growth [49] - The vegetation management division is anticipated to show modest but steady recovery in order flow and operating margin [49] - Management expressed optimism about the potential for meaningful acquisitions in 2025, with an active acquisition target pipeline [51] Other Important Information - The company reduced its accounts receivable by $56.4 million to $305.6 million, representing a reduction in days sales outstanding by about ten days [27] - Operating cash flow in 2024 was $209.8 million, increasing by $78.6 million or 60% year-over-year [28] - The company approved a quarterly dividend of $0.30 per share, representing a 15% increase versus 2024 [30] Q&A Session Summary Question: Will the company start seeing benefits from margin improvements in 2025? - Management indicated that the full effects of cost reduction initiatives have not yet flowed through, but they expect to see improvements in margins as the year progresses [55][70] Question: What are the plans for free cash flow utilization? - Management stated that the primary purpose of accumulated cash is for potential M&A opportunities, rather than further debt reduction [61] Question: What is the outlook for vegetation management revenue in 2025? - Management expressed optimism about achieving growth in the vegetation management division, with expectations for improved order flow and margins [82] Question: What are the expectations for operating margins in the industrial segment? - Management believes that a 15% operating margin in the industrial segment is achievable by the end of 2025 [110] Question: What types of acquisitions is the company considering? - Management is looking at opportunities closely aligned with their current operations, particularly in governmental work and potential expansion into European markets [114]

Government Sales and Regulatory Environment - The company reported a significant dependence on governmental sales, with a substantial portion of revenues derived from federal, state, provincial, and local governmental entities[119] - Changes in the regulatory environment regarding privacy and data protection could increase compliance costs and expose the company to significant penalties[126] - The company is subject to increasingly stringent engine emission regulations, which may impact product sales and competitive position[144] Financial Performance and Metrics - In 2024, the Company's net sales decreased by 4% to $1,628.5 million compared to $1,689.7 million in 2023, primarily due to weak demand in the Vegetation Management Division[183][190] - Net income for 2024 was $115.9 million, a decrease of 15% from $136.2 million in 2023, influenced by lower product demand and associated costs[197] - Gross profit for 2024 was $412.5 million, representing 25.3% of net sales, down from $453.6 million or 26.8% in 2023, attributed to production inefficiencies and costs related to capacity reduction[193] - Total net sales for 2024 were $1,628.5 million, a decrease of 3.6% compared to $1,689.7 million in 2023[289] - Comprehensive income for 2024 was $88.9 million, down from $149.9 million in 2023[292] Acquisitions and Growth Strategy - The company completed acquisitions of Timberwolf in 2021 and Royal Truck in 2023 as part of its growth strategy[134] - The company’s acquisition strategy is crucial for growth, but there are uncertainties regarding the identification of targets and financing for acquisitions[132] - Integration of acquired businesses may distract management and could lead to operational inefficiencies if not managed properly[135] Operational Challenges and Risks - The company faces risks from skilled labor shortages, which could negatively impact production capabilities and increase operating costs[118] - The company has experienced increased costs and supply chain disruptions for raw materials and components, which may adversely affect profitability and market share[117] - Economic downturns and adverse industry conditions could negatively impact demand for the company's products and overall financial performance[115] - Seasonal fluctuations in the agricultural and infrastructure maintenance industries may impact quarterly results and working capital[138] - Extreme weather conditions and climate change risks could adversely affect sales of agricultural and snow removal equipment[140][141] Cash Flow and Capital Management - Net cash provided by operating activities increased to $209.8 million in 2024, compared to $131.2 million in 2023, driven by improved receivables and inventory management[208] - The Company had $147.2 million in cash and cash equivalents held by foreign subsidiaries as of December 31, 2024, with plans to repatriate excess funds to reduce debt and fund working capital[210] - The Company entered into a 2022 Credit Agreement providing up to $655.0 million in loans, with $255.0 million borrowed under a Term Facility and $400.0 million available under a Revolver Facility[211] Shareholder and Equity Information - The company has issued 12,062,868 shares of common stock as of December 31, 2024, with potential dilution of ownership interests for existing shareholders[152] - As of December 31, 2024, four major investors own approximately 38% of the company's outstanding common stock, potentially influencing corporate decisions[156] - The Board of Directors increased the quarterly dividend from $0.26 to $0.30 per share, but future dividend payments are not guaranteed[153] Internal Controls and Governance - The company maintained effective internal control over financial reporting as of December 31, 2024[278] - KPMG LLP issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2024[268] - The company’s management assessed the effectiveness of internal control over financial reporting as of December 31, 2024, concluding that controls were effective[263] Market and Competitive Landscape - The company operates in a highly competitive industry, facing competition from larger firms with greater resources, which could impact its market position[127] - The introduction of new products and technological developments is critical for the company's success, and failure to keep pace could have a material adverse impact on operations[128] - The company is exposed to risks associated with international operations, including compliance with foreign laws and potential trade policy changes that could affect costs and sales[130] Currency and Economic Factors - Fluctuations in currency exchange rates may adversely affect financial results, particularly in international markets[150] - A uniform 10% strengthening of the U.S. dollar relative to foreign currencies would have resulted in a decrease in gross profit of $13.1 million as of December 31, 2024[226] - Inflation moderated in 2024, but costs for commodities and components remained elevated, leading to strategic pricing actions to offset cost pressures[214]

Financial Performance - Fourth quarter net sales were $385.3 million, a decrease of 7.7% compared to $417.5 million in Q4 2023[5]. - Full year net sales totaled $1.629 billion, down 3.6% from the previous year, with Industrial Equipment Division sales increasing by 18.7% to $843.3 million[3][7]. - Net income for Q4 was $28.1 million, or $2.33 per diluted share, compared to $31.5 million, or $2.63 per diluted share in Q4 2023[6]. - Full year net income was $115.9 million, or $9.63 per diluted share, down from $136.2 million, or $11.36 per diluted share in 2023[9]. - Adjusted net income for Q4 2024 was $28.9 million, compared to $31.5 million in Q4 2023, reflecting a decline of 8.4%[33]. - EBITDA for the year ended December 31, 2024, was $220.6 million, down from $247.7 million in 2023, a decrease of 10.9%[38]. - The company reported a diluted EPS of $2.33 for Q4 2024, down from $2.63 in Q4 2023[33]. Backlog and Division Performance - The backlog at the end of Q4 was $668.6 million, with the Industrial Equipment Division backlog remaining elevated despite normalization in the Vegetation Management Division[6]. - The backlog for the Vegetation Management Division decreased to $187.1 million from $352.1 million year-over-year[40]. - The Industrial Equipment Division reported net sales of $225.5 million in Q4 2024, an increase of 11.0% from $203.2 million in Q4 2023[42]. - The Industrial Equipment Division's income from operations for Q4 2024 was $28.0 million, up from $25.0 million in Q4 2023, reflecting a growth of 7.8%[42]. Cash Flow and Debt Management - Operating cash flow for the year was $209.8 million, driven by disciplined inventory management and efficient receivables control[8]. - Total debt net of cash decreased to $23.2 million as of December 31, 2024, from $183.4 million in 2023, a reduction of $160.2 million[38]. Future Outlook and Strategic Initiatives - The company expects annualized cost savings of approximately $25 to $30 million from ongoing cost reduction initiatives launched in Q3 2024[10]. - The outlook for 2025 is cautiously optimistic, with expectations for elevated activity in governmental and industrial contractor markets, and a modest recovery in Vegetation Management markets anticipated in the second half of the year[15]. - The company is closely monitoring potential impacts from tariffs and inflation, with plans to adjust manufacturing strategies and pricing as necessary[16]. Shareholder Value - A quarterly dividend increase of 15% from $0.26 to $0.30 per share reflects the company's strong financial position and commitment to shareholder value[11]. Gross Margin - Gross margin for Q4 2024 was 23.8%, compared to 26.1% in Q4 2023, indicating a decrease of 2.3 percentage points[27].

Group 1 - Alamo Group Inc. (ALG) has been added to the Zacks Rank 5 (Strong Sell) List due to a 6.8% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Ashtead Group plc (ASHTY) is also on the Zacks Rank 5 (Strong Sell) List, with a 6.9% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Clear Secure, Inc. (YOU) has seen a 7% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 List [2]

Company Leadership Transition - Jeff Leonard, President and CEO of Alamo Group Inc., intends to retire by mid-year 2025, pending the appointment of his successor [1][2] - The Board of Directors is actively preparing for this transition and expects to name a new President and CEO within the next several months [1][3] Company Overview - Alamo Group is a leader in the design, manufacture, distribution, and service of high-quality equipment for vegetation management, infrastructure maintenance, and other applications [3] - The company offers a range of products including truck and tractor mounted mowing equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, and agricultural implements [3] - Founded in 1969, Alamo Group has approximately 4,000 employees and operates 28 plants across North America, Europe, Australia, and Brazil as of September 30, 2024 [3]